Hotel owner interdicted from using “Oban Bay” to refer to hotel on Oban Bay wins appeal against sheriff’s decree de plano

About this case:

• Citation:
  [2023] SAC (Civ) 22
• Judgment:
  External link
• Court:
  Sheriff Appeal Court
• Judge:
  Sheriff Principal N A Ross

Crerar Hotel Group Ltd, the owners of another hotel named the Obay Bay Hotel, situated 800 metres from the appellant’s hotel, raised the action seeking to establish that the name change was designed to pass off the appellant’s goods and services as its own. The appellant challenged a decree de plano by the sheriff that it had failed to mount a relevant defence and sought for evidence to be led in the case.

The appeal was heard in the Sheriff Appeal Court by Sheriff Principal Nigel Ross and Appeal Sheriffs Harry Small and Robert Fife. Bowen KC appeared for the appellant and MacKenzie, solicitor advocate, for the respondent.

Descriptive name

The appellant acquired the Regent Hotel on the Corran Esplanade on 9 September 2020 and, following redevelopment, rebranded it as the “Muthu Hotel on Oban Bay” on 3 June 2021. The respondent objected to the change of name and raised a passing off action in the Sheriff Court. Following debate, the respondent sought decree de plano on the basis of the pleadings alone.

In its defences, the appellant specifically denied critical issues in the respondent’s case, such as the the existence of a secondary meaning in the words “Oban Bay” beyond being a descriptive name based on location. On 7 October 2022, the sheriff issued a judgment in which he found that the appellant’s defence lacked candour, specification, and relevancy. The appellant’s position was that the sheriff had asked himself the wrong question about what had to be proved to establish a valid defence.

Counsel for the appellant submitted that the sheriff had not paid sufficient regard of the differences between the names of the two hotels and the fact that there could be no monopoly on describing the location of either hotel. He also erred in disregarding averments of intention which, while not part of the test for passing off, had evidential relevance.

The respondent submitted that the sheriff had correctly considered the entirety of the pleadings and found there to be an uncandid response. It was not necessary to prove intention to pass off, and the question of confusion was for the sheriff to assess. The secondary meaning it contended for was made out, and even so a descriptive name would still be protected where insufficient care had been taken to distinguish competing services.

Arms-length businesses

Delivering the opinion of the court, Sheriff Principal Ross observed: “The court needs to be cautious that lack of candour is made out on the existing averments, to the extent that the pursuer need not lead evidence to obtain decree. It is not so in the present case. The respondent founded on the parties being in the same industry and physically proximate, but that does not prove they are expert in each other’s affairs. There is no underlying legal or factual relationship.”

He continued: “This action is based on the independent actings of two otherwise unrelated, arms-length hotel businesses. The parties are not brought into legal proximity by any mutual contract, or title to property, or other legal relationship, unlike the cases discussed above. The respondent does not have rights against the appellant which are prima facie beyond dispute. The claimed rights must be proved. This is a case where the appellant’s duty of candour may honestly be discharged by denial of detailed knowledge of the respondent’s business.”

Noting further caution was required in passing off cases, Sheriff Principal Ross added: “While there can be cases of passing off in which summary judgment is appropriate, and the question of likelihood of deception is one for the court, not the witnesses to decide, it is necessary to exercise caution. A judge may not be best placed, in any given case, to make that assessment, and evidence may not only assist but be required, if there is doubt.”

Asking whether it had been established in this case, he went on to say: “There is a difference between confusion and misrepresentation. For example, mis-delivery of goods shows no more than that the public has been occasionally, or even regularly, confused between two hotels which have similar names. It does not demonstrate that the respondent (or for that matter the appellant) trades under a name which has become associated in the mind of the public with any particular qualities.”

The Sheriff Principal concluded: “This action was raised after trading had commenced, and not in anticipation of a wrong. The respondent will require to prove damage, which cannot be left to assumption alone. If guests were misdirected, did they care, or even notice, that they were not in the Oban Bay Hotel? Were complaints about the appellant’s hotel caused by disappointment that they did not receive the respondent’s services, or merely disappointment with the facilities? These are the issues that can only be resolved by evidence.”

The case was therefore remitted to the sheriff to proceed as accords.